A Model of Welfare Competition with Evidence from AFDC

Saavedra, Luz Amparo

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URL: http://ub-madoc.bib.uni-mannheim.de/626
URN: urn:nbn:de:bsz:180-madoc-6268
Document Type: Working paper
Year of publication: 1999
The title of a journal, publication series: None
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Subject headings (SWD): USA , Unterstützung , Wohlfahrt
Abstract: In this paper, we test empirically for strategic behavior among the states using the cash support program Aid to Families with Dependent Children (AFDC). To motivate the empirical work, we adapt Wildasin's model of income redistribution to a model of "interjurisdictional welfare competition". Although welfare competition may be generated from different frameworks, we choose Wildasin's model to illustrate how welfare benefit interdependence is generated in the context of welfare migration. We estimate a "representative reaction function" for AFDC using both cross-sections and pooled cross-section data. After controlling for other determinants of AFDC benefit levels and for spatial error autocorrelation, we find evidence showing competition.
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